Europe’s crisisPeter Schwarz23 July 2011This article first appeared on the World Socialist Website.Not since the adoption of the Treaty of Rome 54 years ago has the European Union andits precursors stood so close to the abyss as in the past week. Experts agreed thatshould the heads of government from the euro-zone countries fail to find an answer tothe debt crisis at their emergency summit on Thursday, it would mean the end of theeuro and the European Union.The consequences of such a failure would not be confined to the economic sphere.Ever since the Thirty Years War in the 17th century, Europe has been repeatedlyravaged by wars, culminating in the two world wars of 1914 and 1939. Since then, theEU and the organizations that preceded it have constituted the most importantmechanism for preventing new armed clashes between the European powers. It was noaccident, therefore, that before the summit, for many of the senior politicians who spokeout, Europe—as Spiegel Online put it—“was still a question of war and peace—insteadof euros and cents.” They forcefully warned against a failure of the Brussels emergencysummit.The summit has not solved the crisis but merely postponed it. It has even exacerbatedthe underlying problems.The participants adopted the long-planned second loan package for Greece worth morethan €109 billion, which like the first is linked to imposing drastic austerity measures. Inorder to facilitate its repayment, the interest rate on Greek government debt is beinglowered from 4.5 to 3.5 percent, and the terms of the loan extended from seven and ahalf years to 15 to 30 years.The powers of the European Rescue Fund (EFSF) are being extended; in future it willbuy bonds on the market and proactively support vulnerable countries. However, itstotal volume will not be increased.The summit participants made a great fuss about the involvement of private creditors inthe debt of Greece. The size of their involvement is put at €50 billion by 2014. But acloser inspection reveals this to be a sham. Banks, insurance companies and otherprivate creditors can redeem their Greek bonds at a small loss averaging 20 percent, orexchange them for new, long-term bonds whose repayment is guaranteed by the EU. Inthis way, they can sell their Greek bonds at a price that is far above the current marketvalue. All future risks are being foisted onto the public.
As a result of the measures adopted in Brussels, which still contain many ambiguitiesand uncertainties, Greek government debt of €350 billion will decrease by just €26billion—a drop in the ocean.Ireland and Portugal, which are also highly indebted, will also benefit from lower interestrates from the rescue fund, but participation by the banks is expressly limited to Greece.No provisions at all were made for Spain and Italy, although the interest rates on theirbonds have shot up in the last week, and the debts of the two countries are regarded asa core part of the euro crisis.It is therefore only a matter of time before pressure on the euro increases, and thegovernment heads will again have to meet in an emergency summit.The question of the underlying causes of the debt crisis were not addressed ??at thesummit, let alone answered. Politicians and the media repeat ad nauseam that the crisisis a consequence of dubious financial stewardship, and that the countries affected were"living beyond their means".In fact, the debt crisis is the result of the systematic looting of state coffers and theenrichment of the upper class at the expense of working people. For three decades,taxes on corporations, high incomes and wealth have been continuously lowered. Thebillions of euros with which the speculative losses of the banks were offset after thefinancial crisis of 2008 have overwhelmed public finances.But there is no shortage of funds in Europe that could be used to settle the debts. Thisis demonstrated by the rapid increase of private wealth and the number of millionaires,which continues to grow unabated despite the crisis. According to the World WealthReport, compiled by the US investment bank Merrill Lynch, some 3.1 million millionairesresided in Europe in 2007, who collectively possessed total assets of $10.6 trillion (€7.5trillion). An emergency tax of just 4.7 percent on this wealth could wipe out the entireGreek public debt in one shot.This wealth is rising rapidly, even in the wake of the financial crisis. In Germany alone,according to the Bundesbank, the sum of private fortunes has risen for the past fivequarters by a total of €350 billion—exactly equivalent to the total debt of Greece. Andthis is despite the fact that medium incomes have stagnated for ten years and lowerincomes have fallen. Wealth is concentrated almost exclusively in the upper tenth ofsociety, which possesses over 60 percent of the total wealth.But these assets are off limits to the governments of the euro zone. Even a bank levy,demanded by President Sarkozy for tactical reasons, was rejected categorically inBrussels. The assembled leaders even used the crisis to accelerate the redistribution ofsocial wealth. The emergency summit in Brussels expressly welcomed the austerityprogrammes in Spain and Italy, and insisted that the budget deficit in all euro countriesmust fall below 3 percent by 2013—which means more drastic cuts in social spending.
Above all the “left” bourgeois parties—the Social Democrats, Greens and ex-Stalinists—are insisting on further attacks against working people. They parade themselves as thesaviours of European unity, although their conception of “saving Europe” is synonymouswith unending austerity.In Greece, the victory of the social democratic PASOK party was a prerequisite for anausterity programme that will lower the living standards of workers and pensioners by40 percent by 2015. In Italy, the 86-year-old President Giorgio Napolitano, an old cadreof the Stalinist Communist Party, is now ensuring that the centre-left oppositionsupports the recent austerity programme of the Berlusconi government, which isdirected almost exclusively against those of middle and lower incomes.In Germany, the Social Democratic Party (SPD) has offered its support to the Merkelgovernment in order to pass unpopular measures to deal with the euro crisis. And inSpiegel Online, Green Party leader Cem Özdemir praised Greek Prime MinisterPapandreou because he had introduced his austerity measures against popularresistance.In the 1920s, Leon Trotsky stressed that the European bourgeoisie was incapable ofuniting Europe in the interests of its people. The capitalist system, based on privateproperty, exploitation, personal gain and national interests, was unable to guarantee theharmonious coexistence and solidarity of the European peoples. This assessment isbeing dramatically confirmed today.The debate between the right and “left” bourgeois parties regarding a way out of crisisswings between blatant nationalism, on the one hand, and “saving Europe” through theruin of its people, on the other. As in the 1930s, both roads lead to social decline,dictatorship and war.The working class cannot subordinate itself to either of these camps; it must fight for itsown response to the crisis—the reorganization of Europe on a socialist basis. The largefinancial conglomerates must be expropriated and placed under democratic control; theassets of the super-rich must be heavily taxed or confiscated. On this basis, it will bepossible to resolve the current crisis, to overcome the social divide in Europe and to useits vast resources in the interests of society as a whole.The alternative to the Balkanization of Europe into warring nation-states and thedictatorship of finance capital and its institutions in Brussels is the United SocialistStates of Europe.